A. Fourth Quarter Recap
US Market
US equities bounced back nicely in the fourth quarter with most of the progress in November. Investors continued to focus on the Federal Reserve (Fed) and the rate of change in the interest rates. As the quarter progressed, and the pace of economic growth started to slow, there were indications that the growth in interest rates would start to slow as we entered 2023. Importantly, there were signs that inflation was moderating while corporate earnings continued to be strong.
Even with the rapid rise in interest rates, the annualized GDP for the US in the third quarter came in at 3.2%, which was stronger than expected and above earlier estimates. Unemployment remained low at 3.7% with new job creation remaining quite strong. The latest consumer price index (CPI) numbers continued to edge lower but remained at elevated levels. By year-end, inflation was running at approximately 7.0% year over year. The Fed’s final rate hike in December was trimmed back to 50 basis points (bps) after four consecutive 75 bps tightening moves.
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